Monday January 22 2018

In Summary

According to the report produced by State House last month, the date by which all activities in the Presidential Investors Round Table (PIRT), should have been accomplished, there were more outstanding issues emanating from the initiative than achievements.

The five-phase plan sought to remove hurdles to investment through policy and taxation incentives and strengthen standardisation.

The PIRT was started by President Yoweri Museveni prioritising for investments set out in the second National Development Plan to drive the country to middle-income status.

Ugandan President Yoweri Museveni will be disappointed after a progress report on a development blueprint he initiated in 2004 shows that it fell short of its targets.

According to the report produced by State House last month, the date by which all activities in the Presidential Investors Round Table (PIRT), should have been accomplished, there were more outstanding issues emanating from the initiative than achievements.

The PIRT set out to improve Uganda’s competitiveness in the global economy and service delivery to uplift the population from poverty and onto middle-income status.

The five-phase plan sought to remove hurdles to investment through policy and taxation incentives and strengthen standardisation.

The final phase sought to remove 18 per cent value added tax on imported services and projects in the manufacturing sector, secure access to other countries’ Customs data, strengthen Uganda Bureau of Standards’ inspection capacity, cap bank interest rates, mortgage Namamve industrial park to a bank, identify land for investors and save costs on procurement.

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It was the intention of PIRT that Uganda Revenue Authority would access Customs data of China and other countries from which Ugandan traders import to ensure proper valuation of goods.

Uganda already signed a memorandum of understanding with China and, presently, a database for valuation of all imports to guide the Customs authority is being developed.

“There is a memorandum of understanding and we are working well with China. But it is hard to get their data. Also, our systems are linked with Kenya Revenue Authority but even there we are limited to Uganda’s imports only,” an official familiar with the operations told The EastAfrican.

The URA has access to official Customs data of India and South Africa, as guided by the MoU which stipulates how much information any country can have access to. Nonetheless, access to Customs data remains a contentious issue internationally.

PIRT

The PIRT was started by President Yoweri Museveni prioritising for investments set out in the second National Development Plan to drive the country to middle-income status.

According to PIRT timelines, the goals were to be realised by end of last year but the report highlights several hurdles. For example, removal of VAT was found to be impractical because it was imposed on imported services to encourage investors to contract local services, transfer skills and technology and provide jobs to Ugandans.

Without VAT, most firms would consume services from their home countries despite these being readily available in Uganda.

A proposal to exempt new firms or businesses without regard to the stipulation that they should have been in operation for three years from paying withholding tax was also considered impractical.

“Withholding tax is granted to compliant taxpayers. New businesses especially those engaged in manufacturing can only apply for withholding tax exemption if they qualify,” according to finance ministry.

Interest rate capping

The envisaged capping of interests rates like Kenya did was not implemented because of resistance from Bank of Uganda. One of the PIRT’s objectives was to lower bank charges on loans thereby lowering the cost of doing business.

“The BoU is very clear on this matter. We cannot fix prices in this economy because there is no reversal of the policy on liberalisation and nobody wishes to make that reversal,” BoU’s director of commercial banking, Benedict Seabird told The EastAfrican.

World Bank Doing Business Report 2016 shows minimal improvements as Uganda moved from position 122 in 2015 to 115 in 2016’s ranking. The Bank attributes this to the ease of trading across borders, payment of taxes and starting a business.

In spite of these positives, the report notes that there is still no functional cold chain facility for handling fresh export commodities like fish, flowers and fruits because of the ongoing refurbishment at Entebbe International Airport.

The country also has select industrial parks that should have been in use, but they are not yet served with electricity, water and other infrastructure. The parks were intended to boost industrialisation.Generally access to electricity stands at 22 per cent and even then power tariffs remain high.

The lack of electricity and water for production are also cited among the components which affected achievement of phases I-IV which prioritised agriculture, agribusiness, ICT and e-government.

Value addition

Even though a mineral certification unit was established in the Department of Mines, to strengthen inspection and monitoring, Uganda’s minerals trade remains minimal owing to failure to establish a mineral certification and traceability system and a commodity exchange.

“‘We cannot cry about the past. We will continue to implement the decisions, some of which will be addressed in the next financial year,” said Keith Muhakanizi, Secretary to the Treasury.

“I know the business community is constrained and that is why we should continue with the process of improving business environment,” added Mr Muhakanizi.